Employment Contracts

Do You Need An Employment Contract?

This is a frequently asked question. In some countries an employment contract is mandatory (e.g. Russia and China), other countries require certain details to be given an employee in writing (e.g. many EU countries) and some countries do not have any requirements for written terms and conditions. However, an employment contract forms the basis of the relationship between you and the employee - in any dispute this is what the Labour Courts will use to determine issues.

If no written contract exists, the legal position will be that the employee will retain all their statutory rights while the employer’s rights may well not be enforceable. It is, therefore, always strongly advisable to reduce the employment agreement into written terms and conditions which we call the "Employment Contract".

What Should An Employment Contract Contain?

This varies by country. In many countries, the employment relationship is governed by very detailed regulations such as the French Labour Code. In addition, there may be Collective Bargaining Agreements governing different industries. These will set terms which cannot be varied adversely to the employee but more favorable terms can of course be provided. Below are the main terms which are commonly required by most countries to be specified:

Date employment officially commences.

The employee's basic remuneration.

Additional benefits the employee will receive. However, you should never include any award of stock options or other form of equity reward in the employment contract.

Job title and description.

Normal working hours. However, you should take account of local rules in this regard.

Paid annual leave (vacation).

Normal place of work. (Will you require the employee to work at other locations or to travel - in this case the words will need to be amended.)

If there will be an initial probationary period, this needs to be specified upfront. However, probationary periods are not legal in all countries and many countries set a maximum for the duration of the probationary period (e.g. 6 months in Italy).

Is the position senior enough that you want a non-competition clause? If yes, this will need careful wording to be valid and many countries require consideration to be paid to the employee for this to be valid.

Will the employee develop or have access to any of the Company's Intellectual Property? In this case, it is advisable to be specific about the ownership of the IP and also have a separate and detailed agreement covering this issue.

If the employee will be a sales individual, then sales targets may be in the employment agreement or be covered in a separate sales compensation plan agreement.

If the employee will have access to confidential information, the clauses to protect that information should be included.

Language Of The Contract

Numerous countries require the contract to be in local language. It is permissible for it to be translated in to English but it is important to understand that in the event of any dispute, in the Labour Courts, it is the local language that will prevail.

These are general guidelines, for more information on your specific country or situation, please connect with us.